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4 年前
RPT-Fitch rates Hastings Insurance Group (Finance) plc
2013年10月9日 / 上午9点59分 / 4 年前

RPT-Fitch rates Hastings Insurance Group (Finance) plc

Oct 9 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings expects to rate UK-based Hastings Insurance Group (Finance) plc and its proposed issuance of GBP415m of senior-secured fixed and floating rate notes as follows, upon completion of the pending acquisition of a stake in Hastings by Goldman Sachs Principal Investments (GS PIA):

Hastings Insurance Group (Finance) plc

Long-term Issuer Default Rating (IDR) at 'B+'(EXP) with a Stable Outlook.

Hastings Insurance Group (Finance) plc

Senior Secured Floating Rate Notes due 2019: 'BB-(EXP)'/RR3'.

Hastings Insurance Group (Finance) plc

Senior Secured Fixed Rate Notes due 2020: 'BB-(EXP)'/RR3'.

The proposed notes will refinance existing indebtedness and fund the equity consideration of purchase price by GS PIA. Final note ratings would be contingent upon the receipt of final documentation conforming materially to information already received. Failure to issue the notes according to plan would result in the withdrawal of the above instrument ratings as well as the IDR.

KEY RATING DRIVERS

Ability to Manage Business Volumes through Integrated Broker/Underwriter

Business Model

Hastings Insurance Services Ltd (HISL), the retail broking arm of Hastings Insurance Group operates a traditional insurer panel model on which both Advantage Insurance Company Limited (AICL) and third party insurers sit. This provides HISL with greater ability to channel customers between AICL and third party panel insurers, thus adjusting volumes to current pricing conditions in accordance with AICL's risk-appetite. Price comparison websites are the company's main distribution channel (90% of policies), followed by 'direct to website' and call centres (10%).

Improved Underwriting Profitability in a Challenging Environment Advantage Insurance Company Limited (AICL), the underwriting arm, has achieved a notable improvement in its loss ratio in recent years despite the competitive environment in the UK motor market. This was achieved by discontinuing unprofitable policies and improved fraud prevention measures. As a result, the underwriting business has achieved sub-100% combined ratios over the past two years.

On-going Competitive Pressures

Hastings faces significant competition in its core market. Leaders in the UK private car market are well recognised names such as the Direct Line Group (15% market share), the Admiral Group (9%), AA (8%), Aviva (8%) and LV= (7%).

Hastings' exposure is heavily concentrated in the UK motor market. This segment of the market is subject to significant volatility and competition which could cause pricing pressures. The group's main distribution channel of aggregator websites also tend to be characterised by high price sensitivity. Competitive pressure is further increased by the sale and distribution of products through web-based aggregators and broker panels, where customers are more price sensitive.

Weakening Financial Flexibility Due To A Challenging Economic Climate The long-dated maturity profile of the notes, combined with forecasted deleveraging through funds from operations (FFO) generation (c.5.0x in 2014 to 3.85x in 2017) provides Hastings with a considerable degree of financial flexibility at present. However, the business could be subject to significant volatility, given its target market and customer acquisition techniques.

Hastings needs to achieve significant EBITDA growth over the next several years to achieve sufficient deleveraging. If growth does not take place as envisaged by the business plan, in an environment of softening prices, credits metrics are likely to come under pressure and cause a reduction in financial flexibility. Management Execution of its Business Plan

To a significant extent, the success of Hastings' largely new senior management team is key to determining the outcome of this venture.

RATING SENSITIVITIES

Positive: Future developments that could lead to positive rating action include:

--FFO gross leverage below 3.5x on a sustained basis;

--FFO interest cover above 3.0x on a sustained basis;

--Sustained increase in margin to 26% indicating an improved competitive positions across divisions.

Negative: Future developments that could lead to negative rating action include:

--FFO gross leverage above 5.0x on a sustained basis;

--FFO interest cover below 2.5x on a sustained basis.

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